FireEye Reports Financial Results for Second Quarter 2021

August 5, 2021 at 4:01 PM EDT
  • Revenue from continuing operations increased 17 percent from the second quarter of 2020
  • Annualized recurring revenue for continuing operations increased 19 percent from the end of the second quarter of 2020 to $244 million1
  • Repurchased $68 million in common stock under Board-approved stock repurchase plan

MILPITAS, Calif.--(BUSINESS WIRE)--Aug. 5, 2021-- FireEye, Inc. (NASDAQ: FEYE), the intelligence-led security company, today announced financial results for the second quarter ended June 30, 2021.

“The Mandiant Solutions business continued to deliver strong growth in revenue and annualized recurring revenue for the second quarter ended June 30, 2021,” said Kevin Mandia, FireEye Chief Executive Officer.

“With the elevated threat environment, organizations are increasingly turning to Mandiant to proactively assess whether they are prepared and protected before a breach occurs,” added Mandia. "The Mandiant Advantage platform enables customers to continuously improve their cybersecurity effectiveness through ongoing validation and security automation.”

On June 2, 2021, the company announced the sale of the FireEye Products business to a consortium led by Symphony Technology Group (“STG”) in exchange for a total cash consideration of $1.2 billion and assumption of certain liabilities. The transaction is currently expected to close by the end of the fourth quarter of 2021, subject to customary regulatory approvals and closing conditions. As a result, financial results for the FireEye Products business were classified as discontinued operations in the condensed consolidated statements of operations and excluded from continuing operations. Results of discontinued operations include all revenue and expenses directly attributable to the FireEye Products business, and exclude expenses for shared resources and general corporate overhead.

Second Quarter 2021 Financial Highlights for Continuing Operations

  • Revenue of $114 million, an increase of 17 percent from the second quarter of 2020
  • Annualized recurring revenue of $244 million, an increase of 19 percent from the end of the second quarter of 20201
  • Deferred revenue of $297 million, an increase of 22 percent from the end of the second quarter of 2020
  • GAAP operating margin of negative 74 percent, compared to GAAP operating margin of negative 79 percent in the second quarter of 2020
  • Non-GAAP operating margin of negative 26 percent, compared to non-GAAP operating margin of negative 28 percent in the second quarter of 20202
  • GAAP net loss per basic share attributable to common stockholders of 44 cents, compared to GAAP net loss per basic share attributable to common stockholders of 41 cents in the second quarter of 2020
  • Non-GAAP net loss per basic share attributable to common stockholders of 14 cents, compared to non-GAAP net loss per basic share attributable to common stockholders of 13 cents in the second quarter of 20202
  • GAAP and non-GAAP operating margin and net loss per basic share included approximately $15 million in costs from shared resources to support the FireEye Products business and an estimated $3 million in corporate overhead and shared program expenses that would have been allocated to the FireEye Products business under separate reporting for the combined company3

Second Quarter 2021 Financial Highlights for Combined Continuing and Discontinued Operations

  • Revenue of $248 million, an increase of 8 percent from the second quarter of 2020
  • GAAP operating margin of negative 20 percent, compared to GAAP operating margin of negative 17 percent in the second quarter of 2020
  • Non-GAAP operating margin of 10 percent, compared to non-GAAP operating margin of 10 percent in the second quarter of 20202
  • GAAP net loss per basic share attributable to common stockholders of 29 cents, compared to GAAP net loss per basic share attributable to common stockholders of 24 cents in the second quarter of 2020
  • Non-GAAP net income per basic share attributable to common stockholders of $0.09, compared to non-GAAP net income per basic share attributable to common stockholders of $0.09 in the second quarter of 20202
  • Net cash flow provided by operating activities of $23 million, an increase of 60 percent from the second quarter of 2020

1 Annualized recurring revenue is defined as the annualized run-rate of active term licenses, subscriptions, and support contracts at the end of a reporting period.

2 A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

3 Costs for shared resources incurred prior to the completion of the divestiture of the FireEye Products business are included in the GAAP and non-GAAP operating expenses of continuing operations. We anticipate the majority of operating costs to support the FireEye Products business that are incurred after the divestiture is completed will be reimbursed under a Transition Services Agreement with STG. After the divestiture, these costs, net of reimbursement, if any, will be included in other income and expense.

Third Quarter Outlook for Continuing Operations

The company provides the guidance below for continuing operations based on current market conditions and expectations. The company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled "Forward-Looking Statements" below, including risks and uncertainties associated with the sale of the FireEye Products business announced on June 2, 2021.

 

Q3 2021 Outlook

Revenue

$118 - $122 million

Non-GAAP gross margin

58% - 59%

Non-GAAP operating margin

(27)% - (29)%

Net interest expense

~ $2.5 million

Provision for non-GAAP income taxes

~ $1 million

Weighted average basic shares outstanding

~ 240 million

Non-GAAP net loss per share from continuing operations attributable to common stockholders, basic and diluted

$(0.16) - $(0.14)

Non-GAAP net income per share from discontinued operations attributable to common stockholders, basic and diluted

$0.19 - $0.21

Non-GAAP net income per share attributable to common stockholders, basic and diluted

$0.05 - $0.07

The outlook for third quarter non-GAAP operating margin and non-GAAP net income (loss) per basic share from continuing operations includes an estimated $14 million to $16 million in costs to support the FireEye Products business and an estimated $3 million in corporate overhead and shared program expenses that would have been allocated to the FireEye Products business under separate accounting for the combined company.

Guidance for non-GAAP financial measures excludes stock-based compensation, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition related expenses, restructuring charges, non-cash interest expense related to the company’s convertible senior notes, discrete tax provision (benefit), dividends on Series A convertible preferred stock, accretion of Series A convertible preferred stock, transformation and transition expense, other special non-recurring items, and shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that are anti-dilutive. A reconciliation of non-GAAP guidance measures to the most directly comparable GAAP financial measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability of, the amounts of stock-based compensation expense, amortization of intangible assets, and non-recurring expenses that may be incurred in the future. Stock-based compensation expense is impacted by the company’s future hiring and retention needs, as well as the future fair market value of the company’s common stock, all of which are difficult to predict and subject to constant change. The actual amount of stock-based compensation expense in the third quarter of 2021 will have a significant impact on the company’s GAAP operating margin and net loss per share attributable to common stockholders. Further, amortization of intangible assets, as well as other non-recurring expenses, if any, will also impact results. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the most directly comparable GAAP financial measures for future periods is not available without unreasonable effort.

Third Quarter 2021 Conference Participation and Investor Events

FireEye also today announced conference participation and investor events for the third quarter of 2021:

Date

Presentation Time (PDT)

Conference/Event

August 11, 2021

10:20 a.m. - 10:50 a.m.

KeyBanc Virtual Technology Leadership Forum

August 12, 2021

10:00 a.m. - 10:45 a.m.

FireEye August Threat Briefing for Investors and Financial Analysts

August 24, 2021

12:00 p.m. - 12:45 p.m.

BMO Technology Summit

September 9, 2021

10:00 a.m. - 10:45 a.m.

FireEye September Threat Briefing for Investors and Financial Analysts

September 13, 2021

TBD

Piper Sandler Global Technology Conference

The above presentations will be webcast. Links to live and archived audio webcasts for these events will be available on the Investor Relations section of the company’s website at https://investors.fireeye.com.

Conference Call Information

FireEye will host a conference call today, August 5, 2021 at 5 p.m. Eastern time (2 p.m. Pacific time) to discuss its second quarter financial results and the company’s outlook for the third quarter continuing operations. Interested parties may access the conference call by dialing 800-708-4539 (domestic) or 847-619-6396 (international). A live audio webcast of the call can be accessed from the Investor Relations section of the company's website at https://investors.fireeye.com. An archived version of the webcast will be available at the same website shortly after the conclusion of the live event.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to future financial results for the third quarter, including revenue, non-GAAP gross margin, non-GAAP operating margin, net interest expense, provision for non-GAAP income taxes, weighted average basic shares outstanding, non-GAAP net loss per share from continuing operations attributable to common stockholders, non-GAAP net income per share from discontinued operations attributable to common stockholders, and non-GAAP net income per share attributable to common stockholders in the section entitled “Third Quarter Outlook for Continuing Operations” above, as well as statements regarding plans and opportunities, including the announced sale of the FireEye Products business.

These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause FireEye’s results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause FireEye’s results to differ materially from those expressed or implied by such forward-looking statements include failure to satisfy any of the conditions to the completion of the proposed transaction with STG; the occurrence of any event, change or other circumstance that could give rise to the termination of the Asset Purchase Agreement with STG; the effect of the sale of the FireEye assets on the company’s retained businesses and products; retention of existing executive leadership team members; difficulties in improving go forward execution and product development during transitions; the ability of FireEye to successfully execute strategic plans; the ability to maintain customer and partner relationships; the ability of FireEye to achieve its cost and operating efficiency goals; the anticipated growth of certain market segments; FireEye’s sales pipeline and business strategy; the timing and market acceptance of new product releases and upgrades; and the successful development of new products and the degree to which these products gain market acceptance; whether and when FireEye further executes on its stock repurchase program; customer demand and adoption of FireEye’s products, solutions and services; real or perceived defects, errors or vulnerabilities in FireEye's products, solutions or services; any delay in the release of FireEye's new products, solutions or services; the impact of the COVID-19 pandemic on FireEye's business, results of operations, liquidity and capital resources; FireEye's ability to react to trends and challenges in its business and the markets in which it operates; FireEye's ability to anticipate market needs or develop new or enhanced products, solutions and services to meet those needs; FireEye’s ability to hire and retain key executives and employees; FireEye’s ability to attract new and retain existing customers and train its sales force; the budgeting cycles, seasonal buying patterns and length of FireEye’s sales cycle; risks associated with new offerings; sales and marketing execution risks; the failure to achieve expected synergies and efficiencies of operations between FireEye and its acquired companies; the ability of FireEye and its acquired companies to successfully integrate their respective market opportunities, technologies, products, personnel and operations; the ability of FireEye and its partners to execute their strategies, plans, objectives and expected investments with respect to FireEye’s partnerships; and general market, political, economic, and business conditions, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in FireEye’s Form 10-Q filed with the Securities and Exchange Commission on April 30, 2021, which should be read in conjunction with these financial results and is available on the Investor Relations section of FireEye’s website at investors.fireeye.com and on the SEC website at www.sec.gov.

All forward-looking statements in this press release are based on information available to the company as of the date hereof, and FireEye does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law. Any future product, service, feature, or related specification that may be referenced in this release is for informational purposes only and is not a commitment to deliver any offering, technology or enhancement. FireEye reserves the right to modify future product or service plans at any time.

Non-GAAP Financial Measures

In this release FireEye has provided financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). These non-GAAP financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures used by other companies. The company uses these non-GAAP financial measures internally in analyzing its financial results and believes the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company's financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable financial information prepared in accordance with GAAP and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP financial measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Non-GAAP gross margin. FireEye defines non-GAAP gross margin as total gross profit excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, and, as applicable, other special or non-recurring items, divided by total revenue.

Non-GAAP operating income (loss) from continuing operations and non-GAAP operating margin from continuing operations. FireEye defines non-GAAP operating income (loss) from continuing operations as operating income (loss) from continuing operations excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, transformation and transition expense, restructuring charges, and other special or non-recurring items. FireEye defines non-GAAP operating margin as non-GAAP operating income (loss) divided by total revenue.

Non-GAAP operating income (loss) from combined continuing and discontinued operations and non-GAAP operating margin from combined continuing and discontinued operations. FireEye defines non-GAAP operating income (loss) from combined continuing and discontinued operations as operating income (loss) from continuing operations plus operating income from discontinued operations, excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, restructuring charges, transformation and transition expense, and other special or non-recurring items. FireEye defines non-GAAP operating margin from combined continuing and discontinued operations as non-GAAP operating income (loss) from continuing operations plus non-GAAP operating income from discontinued operations, divided by revenue from continuing operations plus revenue from discontinued operations.

Non-GAAP net loss from continuing operations attributable to common stockholders. FireEye defines non-GAAP net loss from continuing operations attributable to common stockholders as net loss from continuing operations excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, restructuring charges, transformation and transition expense, and other special or non-recurring items.

Non-GAAP net income (loss) attributable to common stockholders. FireEye defines non-GAAP net income (loss) attributable to common stockholders as net income (loss) from continuing operations plus net income (loss) from discontinued operations, excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, restructuring charges, transformation and transition expense, non-cash interest expense related to the company’s convertible senior notes, discrete tax provision (benefit), dividends on Series A convertible preferred stock, accretion of Series A convertible preferred stock, and other special or non-recurring items.

Non-GAAP net income (loss) per basic share from continuing operations attributable to common stockholders. FireEye defines non-GAAP net loss per basic share from continuing operations attributable to common stockholders as non-GAAP net loss from continuing operations attributable to common stockholders divided by weighted average basic shares outstanding, which excludes stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that are anti-dilutive.

Non-GAAP net income (loss) per basic share attributable to common stockholders. FireEye defines non-GAAP net income per basic share attributable to common stockholders as non-GAAP net loss from continuing operations attributable to common stockholders plus non-GAAP net income from discontinued operations, divided by weighted average basic shares outstanding. Weighted average basic shares used to calculate non-GAAP net income per basic share attributable to common stockholders excludes stock options, restricted stock units, performance stock units, shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that are anti-dilutive.

Non-GAAP net income attributable to common stockholders and non-GAAP net income per basic share attributable to common stockholders in the second quarter of 2021 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, transformation and transition expense, non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018, and dividends on Series A convertible preferred stock. Weighted average basic shares outstanding used to calculate non-GAAP net income per basic share attributable to common stockholders excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that were anti-dilutive.

Non-GAAP net income attributable to common stockholders and non-GAAP net income per basic share attributable to common stockholders in the second quarter of 2020 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, and non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018. Weighted average basic shares outstanding used to calculate non-GAAP net income per basic share attributable to common stockholders excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes that were anti-dilutive.

FireEye considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition related expenses, restructuring charges, transformation and transition expense, non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018, dividends on Series A convertible preferred stock, and other non-recurring and discrete items so that management and investors can compare the company's core business operating results over multiple periods.

There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, these non-GAAP financial measures exclude stock-based compensation expense. Stock-based compensation is an important part of FireEye employees' overall compensation and has been, and will continue to be for the foreseeable future, a significant recurring expense in the company's business. Second, the components of the costs that FireEye excludes in its calculation of these non-GAAP financial measures, including not only stock-based compensation, but also amortization of stock-based compensation expense capitalized in software development costs, non-recurring or non-operating items such as amortization of intangible assets, acquisition related expenses, restructuring charges, non-cash interest expense related to the company’s convertible senior notes, and dividends on Series A convertible preferred stock, may differ from the components excluded by peer companies when they report their non-GAAP results of operations. FireEye compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures and evaluating non-GAAP financial measures together with their nearest GAAP equivalents.

About FireEye, Inc.

FireEye is the intelligence-led security company. Working as a seamless, scalable extension of customer security operations, FireEye offers a single platform that blends innovative security technologies, nation-state grade threat intelligence, and world-renowned Mandiant® consulting. With this approach, FireEye eliminates the complexity and burden of cyber security for organizations struggling to prepare for, prevent, and respond to cyber attacks. FireEye has over 10,100 customers across 103 countries, including more than 50 percent of the Forbes Global 2000.

© 2021 FireEye, Inc. All rights reserved. FireEye and Mandiant are registered trademarks or trademarks of FireEye, Inc. in the United States and other countries. All other brands, products, or service names are or may be trademarks or service marks of their respective owners.

FireEye, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

June 30, 2021

 

December 31, 2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

387,310

 

 

$

676,454

 

Short-term investments

866,301

 

 

624,824

 

Accounts receivable, net

77,257

 

 

94,339

 

Inventories

 

 

 

Prepaid expenses and other current assets

40,634

 

 

39,912

 

Current assets held for sale

$

500,688

 

 

$

126,715

 

Total current assets

1,872,190

 

 

1,562,244

 

Property and equipment, net

65,886

 

 

64,336

 

Operating lease right-of-use assets, net

36,096

 

 

36,728

 

Goodwill

1,050,924

 

 

1,050,962

 

Intangible assets, net

98,447

 

 

120,555

 

Deposits and other long-term assets

18,390

 

 

18,084

 

Long-term assets held for sale

$

 

 

$

392,974

 

Total Assets

$

3,141,933

 

 

$

3,245,883

 

 

 

 

 

Liabilities, Convertible preferred stock and Stockholders' equity

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

9,375

 

 

$

4,027

 

Operating lease liabilities, current

12,157

 

 

14,556

 

Accrued and other current liabilities

19,564

 

 

19,730

 

Accrued compensation

65,226

 

 

78,842

 

Convertible senior notes, current, net

440,497

 

 

 

Deferred revenue, current

235,960

 

 

226,356

 

Current liabilities held for sale

$

637,669

 

 

$

410,233

 

Total current liabilities

1,420,448

 

 

753,744

 

Convertible senior notes, non-current, net

543,306

 

 

960,896

 

Deferred revenue, non-current

61,366

 

 

57,897

 

Operating lease liabilities, non-current

56,624

 

 

41,802

 

Other long-term liabilities

4,587

 

 

12,339

 

Long-term liabilities held for sale

$

 

 

$

285,251

 

Total liabilities

2,086,331

 

 

2,111,929

 

Commitments and contingencies:

 

 

 

Series A convertible preferred stock

410,125

 

 

401,050

 

Stockholders' equity:

 

 

 

Common stock

24

 

 

24

 

Additional paid-in capital

3,653,574

 

 

3,623,243

 

Treasury stock

(80,000

)

 

(80,000

)

Accumulated other comprehensive income

1,419

 

 

3,834

 

Accumulated deficit

(2,929,540

)

 

(2,814,197

)

Total stockholders’ equity

645,477

 

 

732,904

 

Total Liabilities, Convertible preferred stock and Stockholders' equity

$

3,141,933

 

 

$

3,245,883

 

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

Platform, cloud subscription and managed services

$

51,936

 

 

$

48,051

 

 

$

107,935

 

 

$

93,353

 

Professional services

61,974

 

 

49,179

 

 

120,663

 

 

96,031

 

Total revenue

113,910

 

 

97,230

 

 

228,598

 

 

189,384

 

Cost of revenue: (1)(2)(3)

 

 

 

 

 

 

 

Platform, cloud subscription and managed services

28,243

 

 

26,497

 

 

54,856

 

 

52,357

 

Professional services

35,282

 

 

27,049

 

 

67,754

 

 

55,841

 

Total cost of revenue

63,525

 

 

53,546

 

 

122,610

 

 

108,198

 

Total gross profit

50,385

 

 

43,684

 

 

105,988

 

 

81,186

 

Operating expenses:

 

 

 

 

 

 

 

Research and development (1)(2)(3)

40,930

 

 

28,665

 

 

82,835

 

 

57,743

 

Sales and marketing (1)(2)

63,018

 

 

52,840

 

 

124,231

 

 

111,586

 

General and administrative (1)

29,020

 

 

26,349

 

 

54,371

 

 

54,857

 

Restructuring charges (4)

1,927

 

 

12,558

 

 

1,927

 

 

18,775

 

Total operating expenses

134,895

 

 

120,412

 

 

263,364

 

 

242,961

 

Operating loss

(84,510

)

 

(76,728

)

 

(157,376

)

 

(161,775

)

Other expense, net (5)

(13,868

)

 

(12,612

)

 

(26,277

)

 

(25,022

)

Loss before income taxes from continuing operations before income taxes

(98,378

)

 

(89,340

)

 

(183,653

)

 

(186,797

)

Provision for income taxes (6)

763

 

 

656

 

 

1,943

 

 

1,006

 

Loss from continuing operations

$

(99,141

)

 

$

(89,996

)

 

$

(185,596

)

 

$

(187,803

)

Net income from discontinued operations, net of income taxes

34,445

 

 

36,721

 

 

70,254

 

 

58,222

 

Net loss

$

(64,696

)

 

$

(53,275

)

 

$

(115,342

)

 

$

(129,581

)

Dividend on series A convertible preferred stock (7)

(4,563

)

 

 

 

(9,075

)

 

 

Accretion of series A convertible preferred stock (8)

 

 

 

 

(82

)

 

 

Net loss attributable to common stockholders

$

(69,259

)

 

$

(53,275

)

 

$

(124,499

)

 

$

(129,581

)

Net loss per share attributable to common stockholders, basic and diluted:

 

 

 

 

 

 

 

Continuing operations

$

(0.44

)

 

$

(0.41

)

 

$

(0.83

)

 

$

(0.86

)

Discontinued operations

0.15

 

 

0.17

 

 

0.30

 

 

0.27

 

Net loss per share attributable to common stockholders, basic and diluted

$

(0.29

)

 

$

(0.24

)

 

$

(0.53

)

 

$

(0.59

)

Weighted average shares used in computing net loss per share, basic and diluted

237,279

 

 

221,352

 

 

236,016

 

 

219,570

 

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

Six Months Ended June 30,

 

 

2021

 

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$

(185,596

)

 

$

(187,803

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

46,648

 

 

 

37,684

 

Stock-based compensation

 

72,173

 

 

 

52,802

 

Non-cash interest expense related to convertible senior notes

 

22,907

 

 

 

24,367

 

Deferred income taxes

 

(114

)

 

 

154

 

Other

 

20

 

 

 

1,166

 

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:

 

 

 

Accounts receivable

 

17,294

 

 

 

25,910

 

Prepaid expenses and other assets

 

6,323

 

 

 

5,089

 

Accounts payable

 

4,331

 

 

 

(6,203

)

Accrued liabilities

 

(1,540

)

 

 

(5,046

)

Accrued compensation

 

(13,616

)

 

 

14,245

 

Deferred revenue

 

13,072

 

 

 

(29,157

)

Other long-term liabilities

 

(4,917

)

 

 

(5,701

)

Net cash used in operating activities - continuing operations

 

(23,015

)

 

 

(72,493

)

Net cash provided by operating activities - discontinued operations

 

67,317

 

 

 

62,727

 

Net cash provided by (used in) operating activities

 

44,302

 

 

 

(9,766

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchases of property and equipment and demonstration units

 

(13,497

)

 

 

(14,037

)

Purchases of short-term investments

 

(512,642

)

 

 

(106,631

)

Proceeds from maturities of short-term investments

 

264,160

 

 

 

277,749

 

Proceeds from sales of short-term investments

 

 

 

 

28,208

 

Business acquisitions, net of cash acquired

 

50

 

 

 

(6,284

)

Purchase of investment in privately held company

 

 

 

 

(1,000

)

Lease deposits

 

725

 

 

 

34

 

Net cash provided by (used in) investing activities - continuing operations

 

(261,204

)

 

 

178,039

 

Net cash used in investing activities - discontinued operations

 

(10,039

)

 

 

(10,130

)

Net cash used in investing activities

 

(271,243

)

 

 

167,909

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Repurchase of convertible senior notes

 

 

 

 

(96,392

)

Share repurchases

 

(68,334

)

 

$

 

Accretion of series A convertible preferred stock

 

(9,073

)

 

 

 

Series A convertible preferred stock

 

8,993

 

 

 

 

Payment related to shares withheld for taxes

 

(9,724

)

 

 

(8,039

)

Proceeds from employee stock purchase plan

 

12,335

 

 

 

12,300

 

Proceeds from exercise of equity awards

 

3,600

 

 

 

3,731

 

Net cash used in financing activities

 

(62,203

)

 

 

(88,400

)

Net change in cash and cash equivalents

 

(289,144

)

 

 

69,743

 

Cash and cash equivalents, beginning of period

 

676,454

 

 

 

334,603

 

Cash and cash equivalents, end of period

$

387,310

 

 

$

404,346

 

FireEye, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP operating loss

$

(84,510

)

 

$

(76,728

)

 

$

(157,376

)

 

$

(161,774

)

Stock-based compensation expense (1)

38,742

 

 

26,650

 

 

72,143

 

 

52,508

 

Amortization of stock-based compensation capitalized in software development costs (3)

459

 

 

421

 

 

993

 

 

785

 

Amortization of intangible assets (2)

10,998

 

 

10,025

 

 

22,108

 

 

20,395

 

Transformation and transition expense (9)

3,190

 

 

 

 

3,190

 

 

 

Restructuring charges (4)

1,927

 

 

12,558

 

 

1,927

 

 

18,775

 

Non-GAAP operating income (loss)

$

(29,194

)

 

$

(27,074

)

 

$

(57,015

)

 

$

(69,311

)

GAAP gross margin

44

%

 

45

%

 

46

%

 

43

%

Stock-based compensation expense (1)

9

%

 

7

%

 

8

%

 

7

%

Amortization of intangible assets (2)

6

%

 

6

%

 

6

%

 

6

%

Non-GAAP gross margin

59

%

 

58

%

 

60

%

 

56

%

GAAP operating margin

(74

)%

 

(79

)%

 

(69

)%

 

(85

)%

Stock-based compensation expense (1)

33

%

 

28

%

 

32

%

 

27

%

Amortization of stock-based compensation capitalized in software development costs (3)

%

 

%

 

%

 

%

Amortization of intangible assets (2)

10

%

 

10

%

 

10

%

 

11

%

Transformation and transition expense (9)

3

%

 

%

 

1

%

 

%

Restructuring charges (4)

2

%

 

13

%

 

1

%

 

10

%

Non-GAAP operating margin

(26

)%

 

(28

)%

 

(25

)%

 

(37

)%

GAAP net loss attributable to common stockholders

$

(69,259

)

 

$

(53,275

)

 

$

(124,499

)

 

$

(129,581

)

Continuing operations:

 

 

 

 

 

 

 

Stock-based compensation expense (1)

38,742

 

 

26,650

 

 

72,143

 

 

52,508

 

Amortization of stock-based compensation capitalized in software development costs (3)

459

 

 

421

 

 

993

 

 

785

 

Amortization of intangible assets (2)

10,998

 

 

10,025

 

 

22,108

 

 

20,395

 

Restructuring charges (4)

1,927

 

 

12,558

 

 

1,927

 

 

18,775

 

Non-cash interest expense related to convertible senior notes (5)

11,523

 

 

12,002

 

 

22,907

 

 

24,367

 

Adjustment to provision (benefit) from income taxes (6)

 

 

 

 

200

 

 

(315

)

Dividend on series A convertible preferred stock (7)

4,563

 

 

 

 

9,075

 

 

 

Accretion of series A convertible preferred stock (8)

 

 

 

 

82

 

 

 

Transformation and transition expense (9)

3,190

 

 

 

 

3,190

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

Non-GAAP adjustments for discontinued operations (10)

19,980

 

 

11,905

 

 

36,279

 

 

29,234

 

Non-GAAP net income attributable to common stockholders

$

22,123

 

 

$

20,286

 

 

$

44,405

 

 

$

16,168

 

GAAP net loss per share attributable to common stockholders, basic and diluted

$

(0.29

)

 

$

(0.24

)

 

$

(0.53

)

 

$

(0.59

)

Continuing operations:

 

 

 

 

 

 

 

Stock-based compensation expense (1)

0.16

 

 

0.12

 

 

0.32

 

 

0.24

 

Amortization of stock-based compensation capitalized in software development costs (3)

 

 

 

 

 

 

 

Amortization of intangible assets (2)

0.05

 

 

0.05

 

 

0.09

 

 

0.09

 

Restructuring charges (4)

0.01

 

 

0.06

 

 

0.01

 

 

0.09

 

Non-cash interest expense related to convertible senior notes (5)

0.05

 

 

0.05

 

 

0.10

 

 

0.11

 

Adjustment to provision (benefit) from income taxes (6)

 

 

 

 

 

 

 

Dividend on series A convertible preferred stock (7)

0.02

 

 

 

 

0.04

 

 

 

Accretion of series A convertible preferred stock (8)

 

 

 

 

 

 

 

Transformation and transition expense (9)

0.01

 

 

 

 

0.01

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

Non-GAAP adjustments for discontinued operations (10)

0.08

 

 

0.05

 

 

0.15

 

 

0.13

 

Non-GAAP net income per share attributable to common stockholders, basic and diluted

$

0.09

 

 

$

0.09

 

 

$

0.19

 

 

$

0.07

 

Weighted average shares used in per share calculation for Non-GAAP, basic and diluted

237,279

 

 

221,352

 

 

236,016

 

 

219,570

 

 

 

 

 

 

 

 

 

(1) Includes stock-based compensation expense as follows:

 

 

 

 

 

 

 

Cost of platform, cloud subscription and managed services revenue

$

3,487

 

 

$

2,486

 

 

$

6,301

 

 

$

4,865

 

Cost of professional services revenue

6,135

 

 

4,171

 

 

11,321

 

 

7,748

 

Research and development expense

9,320

 

 

4,850

 

 

17,743

 

 

10,366

 

Sales and marketing expense

11,539

 

 

8,162

 

 

21,429

 

 

17,043

 

General and administrative expense

8,261

 

 

6,981

 

 

15,349

 

 

12,486

 

Total stock-based compensation expense

$

38,742

 

 

$

26,650

 

 

$

72,143

 

 

$

52,508

 

 

 

 

 

 

 

 

 

(2) Includes amortization of intangible assets as follows:

 

 

 

 

 

 

 

Cost of platform, cloud subscription and managed services revenue

$

7,025

 

 

$

6,313

 

 

$

14,137

 

 

$

12,971

 

Sales and marketing expense

3,973

 

 

3,712

 

 

7,971

 

 

7,424

 

Total amortization of intangible assets

$

10,998

 

 

$

10,025

 

 

$

22,108

 

 

$

20,395

 

 

 

 

 

 

 

 

 

(3) Includes amortization of stock-based compensation capitalized in software development costs as follows:

 

 

 

 

 

 

 

Research and development expense

459

 

 

421

 

 

993

 

 

785

 

 

 

 

 

 

 

 

 

(4) Includes restructuring charges as follows:

 

 

 

 

 

 

 

Restructuring charges

$

1,927

 

 

$

12,558

 

 

$

1,927

 

 

$

18,775

 

 

 

 

 

 

 

 

 

(5) Includes non-cash interest expense related to convertible senior notes as follows:

 

 

 

 

 

 

 

Other income, net

$

11,523

 

 

$

12,002

 

 

$

22,907

 

 

$

24,367

 

 

 

 

 

 

 

 

 

(6) Includes income tax effect of non-GAAP adjustments as follows:

 

 

 

 

 

 

 

Adjustment to provision (benefit) from income taxes

$

 

 

$

 

 

$

200

 

 

$

(315

)

 

 

 

 

 

 

 

 

(7) Dividend on series A convertible preferred stock

$

4,563

 

 

$

 

 

$

9,075

 

 

$

 

 

 

 

 

 

 

 

 

(8) Accretion of series A convertible preferred stock

$

 

 

$

 

 

$

82

 

 

$

 

 

 

 

 

 

 

 

 

(9) Transformation and transition expense

$

3,190

 

 

$

 

 

$

3,190

 

 

$

 

 

 

 

 

 

 

 

 

(10) Includes non-GAAP adjustments for discontinued operations as follows:

 

 

 

 

 

 

 

Stock-based compensation expense

$

13,485

 

 

$

10,102

 

 

$

25,851

 

 

$

20,422

 

Amortization of intangibles

486

 

 

1,220

 

 

1,221

 

 

2,809

 

Amortization of stock-based compensation capitalized in software development costs

543

 

 

583

 

 

1,081

 

 

1,246

 

Restructuring charges

 

 

 

 

 

 

4,757

 

Divestiture related costs

5,466

 

 

 

 

8,126

 

 

 

 

$

19,980

 

 

$

11,905

 

 

$

36,279

 

 

$

29,234

 

 

 

 

 

 

 

 

 

FireEye, Inc.

SUMMARY OF CONTINUING OPERATIONS, DISCONTINUED OPERATIONS, AND COMBINED OPERATIONS

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

 

 

Three Months Ended June 30, 2021

 

Continuing

 

Discontinued

 

Combined

 

 

 

 

 

 

Revenue

$

113,910

 

 

$

134,045

 

 

$

247,955

 

Cost of revenue

63,525

 

 

28,001

 

 

91,527

 

Total gross profit

$

50,385

 

 

$

106,044

 

 

$

156,429

 

 

 

 

 

 

 

Research and development

$

40,930

 

 

$

28,665

 

 

$

69,595

 

Sales and marketing

63,018

 

 

36,886

 

 

99,904

 

General and administrative

29,020

 

 

5,466

 

 

34,486

 

Restructuring charges

1,927

 

 

 

 

1,927

 

GAAP operating income (loss)

$

(84,510

)

 

$

35,027

 

 

$

(49,483

)

Non-GAAP adjustments

55,316

 

 

19,980

 

 

75,296

 

Non-GAAP operating income (loss)

$

(29,194

)

 

$

55,007

 

 

$

25,813

 

 

 

 

 

 

 

Other income and expense, provision for income tax & dividends on series A convertible preferred stock

$

(19,194

)

 

$

(582

)

 

$

(19,776

)

Net loss attributable to common stockholders

$

(103,704

)

 

$

34,445

 

 

$

(69,259

)

 

 

 

 

 

 

GAAP operating margin

(74

)%

 

26

%

 

(20

)%

Non-GAAP adjustments related to operating income (loss)

48

%

 

15

%

 

30

%

Non-GAAP operating margin

(26

)%

 

41

%

 

10

%

 

 

 

 

 

 

Non-GAAP Adjustments:

 

 

 

 

 

Stock-based compensation expense

$

38,743

 

 

$

13,485

 

 

$

52,228

 

Amortization of intangible assets

10,997

 

 

486

 

 

11,483

 

Amortization of stock-based compensation capitalized in software development costs

459

 

 

543

 

 

1,002

 

Restructuring charges

1,927

 

 

 

 

1,927

 

Divestiture related costs

 

 

5,466

 

 

5,466

 

Transformation and transition expense

3,190

 

 

 

 

3,190

 

Non-GAAP adjustments related to operating income (loss)

$

55,316

 

 

$

19,980

 

 

$

75,296

 

 

 

 

 

 

 

Non-cash interest expense related to convertible senior notes

$

11,523

 

 

$

 

 

$

11,523

 

Dividend on series A convertible preferred stock

4,563

 

 

 

 

4,563

 

Accretion of series A convertible preferred stock

 

 

 

 

 

Non-GAAP adjustments below operating income (loss)

$

16,085

 

 

$

 

 

$

16,085

 

Total non-GAAP adjustments

$

71,402

 

 

$

19,980

 

 

$

91,382

 

 

 

 

 

 

 

GAAP net income (loss) per share attributable to common stockholders, basic and diluted

$

(0.44

)

 

$

0.15

 

 

$

(0.29

)

Non-GAAP net income (loss) per share attributable to common stockholders, basic and diluted

$

(0.14

)

 

$

0.23

 

 

$

0.09

 

Weighted average shares used in per share calculation for non-GAAP, basic and diluted

237,279

 

 

237,279

 

 

237,279

 

 

Three Months Ended June 30, 2020

 

Continuing

 

Discontinued

 

Combined

 

 

 

 

 

 

Revenue

$

97,230

 

 

$

132,671

 

 

$

229,901

 

Cost of revenue

53,546

 

 

29,947

 

 

83,493

 

Total gross profit

$

43,684

 

 

$

102,724

 

 

$

146,408

 

 

 

 

 

 

 

Research and development

$

28,665

 

 

$

29,260

 

 

$

57,925

 

Sales and marketing

52,840

 

 

36,306

 

 

89,146

 

General and administrative

26,349

 

 

 

 

26,349

 

Restructuring charges

12,558

 

 

 

 

12,558

 

GAAP operating income (loss)

$

(76,728

)

 

$

37,158

 

 

$

(39,570

)

Non-GAAP adjustments

49,654

 

 

11,905

 

 

61,559

 

Non-GAAP operating income (loss)

$

(27,073

)

 

$

49,062

 

 

$

21,989

 

 

 

 

 

 

 

Other income and expense, provision for income tax & dividends on series A convertible preferred stock

$

(13,269

)

 

$

(437

)

 

$

(13,706

)

Net loss attributable to common stockholders

$

(89,996

)

 

$

36,720

 

 

$

(53,276

)

 

 

 

 

 

 

GAAP operating margin

(79

)%

 

28

%

 

(17

)%

Non-GAAP adjustments related to operating income (loss)

51

%

 

9

%

 

27

%

Non-GAAP operating margin

(28

)%

 

37

%

 

10

%

 

 

 

 

 

 

Non-GAAP Adjustments:

 

 

 

 

 

Stock-based compensation expense

$

26,650

 

 

$

10,102

 

 

$

36,752

 

Amortization of intangible assets

10,025

 

 

1,220

 

 

11,245

 

Amortization of stock-based compensation capitalized in software development costs

421

 

 

583

 

 

1,004

 

Restructuring charges

12,558

 

 

 

 

12,558

 

Divestiture related costs

 

 

 

 

 

Transformation and transition expense

 

 

 

 

 

Non-GAAP adjustments related to operating income (loss)

$

49,654

 

 

$

11,905

 

 

$

61,559

 

 

 

 

 

 

 

Non-cash interest expense related to convertible senior notes

$

12,002

 

 

$

 

 

$

12,002

 

Dividend on series A convertible preferred stock

 

 

 

 

 

Accretion of series A convertible preferred stock

 

 

 

 

 

Non-GAAP adjustments below operating income (loss)

$

12,002

 

 

$

 

 

$

12,002

 

Total non-GAAP adjustments

$

61,656

 

 

$

11,905

 

 

$

73,561

 

 

 

 

 

 

 

GAAP net income (loss) per share attributable to common stockholders, basic and diluted

$

(0.41

)

 

$

0.17

 

 

$

(0.24

)

Non-GAAP net income (loss) per share attributable to common stockholders, basic and diluted

$

(0.13

)

 

$

0.22

 

 

$

0.09

 

Weighted average shares used in per share calculation for non-GAAP, basic and diluted

221,352

 

 

221,352

 

 

221,352

 

 

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Source: FireEye